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OXY USA Inc. v. Mesa County Board of Commissioners

Supreme Court of Colorado, En Banc

November 13, 2017

OXY USA Inc., Petitioner
v.
Mesa County Board of Commissioners, Respondent

         Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 14CA1914.

          Attorneys for Petitioner: The Poe Law Office LLC Alan Poe Rachel Poe Centennial, Colorado Holland & Hart LLP Christina Gomez Denver, Colorado

          Attorneys for Respondent: Dufford, Waldeck, Milburn & Krohn, LLP Nathan A. Keever Grand Junction, Colorado

          Attorneys for Amici Curiae Plateau Valley School District 50, Plateau Valley Fire District, and Plateau Valley Hospital District: Ireland Stapleton Pryor & Pascoe, PC Jeffrey S. Hurd Grand Junction, Colorado

          HOOD JUSTICE

         ¶1 In 2011, OXY USA Inc. ("Oxy"), made a mistake that caused it to overpay its property taxes on oil and gas produced from leaseholds in Mesa County. Oxy failed to deduct certain costs it was entitled to deduct. By the time it realized the mistake, the protest period had expired. The company nonetheless contends it is entitled to abatement and refund of the overpayment pursuant to section 39-10-114(1)(a)(I)(A), C.R.S. (2017). But the county board of commissioners maintains that the abatement-and-refund provision does not apply here because Oxy was the sole source of the error.

         ¶2 Section 39-10-114(1)(a)(I)(A) requires, with some exceptions inapplicable here, a county board of commissioners to abate and refund property taxes that have been "levied erroneously or illegally, whether due to erroneous valuation for assessment, irregularity in levying, clerical error, or overvaluation." Relying on our precedent, the court of appeals held that Oxy can't receive abatement and refund for overpayment due to its own mistake. The question for us is whether that precedent controls here. We conclude it does not.

         ¶3 We hold that section 39-10-114(1)(a)(I)(A) gives taxpayers the right to seek abatement and refund for erroneously or illegally levied taxes resulting from overvaluation caused solely by taxpayer mistake. We therefore conclude that Oxy is entitled to abatement and refund for its overpayment of taxes in the tax year at issue here. Accordingly, we reverse the judgment of the court of appeals and remand for further proceedings consistent with this opinion.

         I. Facts and Procedural History

         ¶4 Oxy operates oil and gas leaseholds in Mesa County, Colorado. Colorado oil and gas deposits are treated as estates in real property. Clevinger v. Cont'l Oil Co., 369 P.2d 550, 551 (Colo. 1962). The owners often lease these estates to companies with the resources to develop them. Oxy is one such company.

         ¶5 Like all other oil and gas leasehold operators in Colorado, Oxy is required by statute to file an annual statement containing information about the amount of oil or gas sold or transported from each of its wellheads, as well as the selling price of oil or gas at the wellhead. § 39-7-101(1)(c), (d), C.R.S. (2017). The statute defines "selling price at the wellhead" as the net taxable revenue realized by the taxpayer for the sale of oil or gas. § 39-7-101(1)(d). Net taxable revenue is equal to gross lease revenue minus deductions for costs incurred in gathering, transporting, manufacturing, and processing the oil or gas. Id. The operator's annual statement is used by the county assessor to value the operator's leasehold for property tax assessment. § 39-7-102(1), C.R.S. (2017). Leaseholds are valued at an amount equal to 87.5% of the "selling price of the oil or gas sold from each wellhead." Id.

         ¶6 After filing its operator statement in 2012, Oxy discovered that it had failed to deduct certain allowable costs when preparing its statements for tax years 2011 and 2012. Without those deductions, Oxy over-reported the selling price of its gas at the wellhead for those years. This led Oxy to overvalue its leasehold and thereby overpay its taxes. This is undisputed.

         ¶7 When Oxy discovered its error, it filed revised operator statements and petitioned for abatement under section 39-10-114(1)(a)(I)(A), which allows the abatement and refund of property taxes erroneously or illegally levied "due to erroneous valuation for assessment, irregularity in levying, clerical error, or overvaluation." Oxy sought abatement for tax years 2011 and 2012, but only the tax-year-2011 petition is at issue here.

         ¶8 The Mesa County Board of Commissioners ("County Board") denied Oxy's petition, ruling that it did not satisfy any of section 39-10-114(1)(a)(I)(A)'s enumerated grounds for abatement.

         ¶9 The Board of Assessment Appeals ("BAA") reversed the County Board. The BAA concluded that due to Oxy's error on its operator statement, the tax-year-2011 valuation of its property was incorrect. Accordingly, the BAA determined that Oxy was entitled to abatement and refund for that year.

         ¶10 The court of appeals reversed the BAA decision, concluding that because Oxy was at fault for the error in this case, Oxy could not seek abatement on any of ...


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